Sales are 60% for cash and 40% on credit. Credit sales are collected in the mont
ID: 2375570 • Letter: S
Question
Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
Monthly expenses are as follows: commissions, 13% of sales; rent, $2,000 per month; other expenses (excluding depreciation), 3% of sales. Assume that these expenses are paid monthly. Depreciation is $200 per month (includes depreciation on new assets.)
Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Complete the following using the above data. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Round the "Schedule of Expected Cash Disbursements %u2014 Merchandise Purchases" answers to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
may june quarter
cash sale 45000 48000 129600
credit sale 24400 30000 75200
total 69400 78000 204800
collections
Merchandise Purchase budget
may june quarter
Budgeted cost of goods sold 60000 64000 172800
Add desired ending inventory 51200 19200 118400
Total needs 111200 83200 291200
Less begining inventory 48000 51200 129200
Required purchase 63200 32000 162000
merchandise purchases
may june Quarter
may purchase 31600 31600 63200
june purchases 16000 16000
Total disbursement 65000 47600 167800
3.
expected cash disbursement
May june quarter
Commisions 9750 10400 28080
Rent 2000 2000 6000
other expenses 2250 2400 6480
Total disbursement 14000 14800 40560
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